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Severance Agreements

A severance agreement is a contract entered into between a departing employee and his or her employer. Severance agreements are a common way for the two parties to end the employment relationship in an amicable manner. The severance agreement is a way that the employer can receive a release from the employee that the employee won’t sue the employer and the employee will receive some form of additional compensation to release any claims.

If an employee receives a severance agreement, the employee should meet with an experienced employment attorney to review the severance agreement and discuss whether the employee has any potential claims against the employer. Employment law is complex and there are many potential claims an employee may have, so it is important that the employee be honest with the attorney and explain all the circumstances of the termination and the incidents leading up to the termination. Even in situations where the employee is told their position is being eliminated or when the employee is fired, it is best to speak to an employment attorney before signing away any of the employee’s rights to pursue the matter in court.

An employee may be able to negotiate additional severance compensation or  an agreement that the employer will also waive any potential claims for wrongful behavior or any other claims that might be brought against the employee.

Some common provisions in a severance agreement that an attorney can negotiate on behalf of the employee include:

  • Severance pay
  • Partial or full employer contribution toward COBRA health insurance premiums
  • Outplacement services paid by the employer
  • A reference letter
  • A prorated bonus payment

An employer must pay the employee for wages earned, accrued but unused vacation time (if the company has a policy providing for such), and business expenses incurred prior to the separation (again subject to the company policy), even if an employee does not sign a separation agreement.

Some provisions employers typically want included in the severance agreement include:

  • A release of any and all claims the employee could bring against the employer
  • A nondisclosure agreement protecting the employer’s trade secrets, confidential and proprietary information
  • A non-disparagement clause to prevent the employee from complaining publicly about their employment or the circumstances of their departure

There is no federal or Minnesota law that requires an employee to give an employee severance, however, if the employer has a severance plan in place or has paid severance to other employees in the past, the employee may have an argument where they are entitled to severance payments. Generally if there is no plan in place, the amount of compensation given in severance will vary according to the specific circumstances of the situation. Some of the factors considered are the length of the employer’s tenure with the employer, the circumstances under which the employee’s employment with the employer ended and the financial stability of the employer.

If an employee feels their employment relationship will be coming to an end, the employee should discuss their situation with an experienced employment attorney who may be able to assist in negotiating a severance agreement or improving the terms offered. It is not usually in an employee’s best interest to leave a position with a company without having an experienced employment attorney negotiate on their behalf.

If you have questions about a severance agreement, please contact employment lawyer at Holden Law Firm. Call 952-345-8272 or email us at John@holdenlawfirm.com

This article may not be reproduced in any form without the permission of Holden Law Firm. © Copyright 2021 Holden Law Firm. All rights reserved.

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